Three messages before we get started.If you’re a tech entrepreneur, don’t you have unique legal needs that the average lawyer can’t help you with? That’s why you need Scott Edward Walker, Walker Corporate Law. If you read his articles on VentureBeat, you know that he can help you with issues like raising money or issuing stock options or even deciding whether to form a corporation. Scott Edward Walker is the entrepreneur’s lawyer. See him at WalkerCorporateLaw.com.
And do you remember when I interviewed Sarah Sutton Fell about how thousands of people pay for her job site? Look at the biggest point that she made. She said that she had a phone number on every page of her site because, and here’s the stat, 95 percent of the people who call end up buying. Most people though don’t call her, but seeing a real number increases their confidence in her and they buy. So, try this. Go to Grasshopper.com and get a phone number that will make your company sound professional, add it to your site and see what happens, Grasshopper.com.
And remember Patrick Buckley who I interviewed? He came up with an idea for an iPad case. He built the store to sell it, and in a few months he generated about a million dollars in sales. Well, the platform he used is Shopify. If you have an idea to sell anything, set up your store on Shopify.com because Shopify stores are designed to increase sales plus Shopify makes it easy to set up a beautiful store and manage it, Shopify.com.
Here’s the program.
Andrew Warner: Hey everyone, my name is Andrew Warner. I’m the founder of Mixergy.com, home of the ambitious upstart, and what that means is I interview entrepreneurs about how they built their businesses for an audience of ambitious entrepreneurs, ambitious business people who want to learn from them.
A few weeks ago I did an interview with the top consultant in the online personal space, and we talked about how new dating sites use something called WhiteLabelDating to give them an active community when they launch. Well, the founder and CEO of Global Personals Limited, the company behind WhiteLabelDating is Ross Williams. He heard me talk about his company and offered to do an interview here about how he built it. Ross, welcome to Mixergy.
Ross Williams: Andrew, hi there. It’s good to see you.
Andrew: So, how many active members do you have now?
Ross: We’ve now got just over four million members that are spread to the UK, Ireland, Australia, South Africa, New Zealand and growing to the U. S. at the moment.
Andrew: Could you give me an example of one company that launched using your service?
Ross: Oh, we’ve got a whole spectrum. So, we work with media publishers and entrepreneurs normally. So, on the media side we do the dating site for “FHM Magazine,” “Maxim,” “Men’s Health,” “Cosmopolitan,” the independent newspaper, the “Mirror.” We’ve done a lot of media brands, and the entrepreneurs that use our service, PlentyMoreFish.com, (________), and a lot of mature, single dating sites. We’ve got in total now well over a thousand partners running over four and a half thousand sites on our platform.
Andrew: Does the site called PlentyMoreFish.com kind of playing off the name, PlentyOfFish.com?
Ross: I could see how you think that. I don’t allow myself to go there. The way we work is we work with people, affiliates, domain people. They just want to monetize domains and maintain the traffic that they’ve got. Dating is a great way to do that.
Andrew: All right. We didn’t get to talk about this in the pre-interview, but do you feel comfortable revealing your revenues here?
Ross: Yeah. It’s being released in the press. So, at the moment we’re doing about 20 million pounds revenue per year. We used to be worth 40 million dollars. We’re not quite that now, thanks to our bankers. It’s grown really, really nicely.
Andrew: OK. And this is your company. What percentage do you own?
Ross: So, I’ve got 70 percent of the business. My partner’s got 20 percent and we’ve also got an EMI which is over here basically options for staff. So, key staff in the business have got a little bit as well.
Andrew: So, before the interview you and I were talking about how you saw that to raise money for my first business I took my clothes back to J. Crews. I got a refund after wearing them and telling the company that I wore them. I got my refund. I used that money to start my business.
Some people who heard that said, “Andrew, that’s a skeavy way to start a business. I’m not sure that I can get behind you because of that.” You had a different take. What was your take on that?
Ross: Yeah. I wish I was that clever. Back here we’ve got something called Marks & Spencer where you can still do that, take your clothes back after a year or something. I might do that another time.
Andrew: You did something similar. It wasn’t going after investors and starting out proper.
Ross: Oh, Great Clothes. So, the thing is on startups when I talk to people and say, “Oh, I need investment” or “I need money”. If you believe in your idea, the kind of money that people need to get started on this, it’s not a huge deal. You know, you’ve got to go in debt. You’ve got to risk a lot, but there’s a huge return available.
So, we started, myself, my business partner, we had a few credit cards. I think we had five credit cards in the end. What we used to do is we used to buy traffic using one card, move that balance to another card, buy more traffic, move it to another. I think after about a year we managed to pay it all off.
You look back, and it’s good fun. You look back now and think, “Oh, it was exciting. I had no responsibilities, all that freedom.” I’m sure at the time it was the most stressful that I remember, but it got us growth. We retained the equity and crucially because it was our money we looked after it. We only spent it where we got a return.
Andrew: And no responsible website, no responsible magazine would tell others to do that, but you know what, if that’s the way you did it, I want to be open and say, “I did that, too.” I would borrow money off my credit cards, and in order to pay them because the business wasn’t big enough or successful enough or turning out nearly enough cash to pay for them, I’d go take out another card. Maybe, it was a Discover card paying off a Visa card which paid off the week before a MasterCard. That’s the way I did it.
Now, you said that you did that in order to buy Google AdWords. You were buying ads for what? What was the business at the time?
Ross: So, running WhiteLabelDating. It’s an online dating platform. And the way it works effectively is people can plug in and we give the software. We needed a database, OK? So, it ended up as critical mass for dating. So, we had to go out and buy it. So, what we did, we’ve got a site, Singles365.com which is our own brand site. So, we run that in parallel with WhiteLabelDating.
We basically went out in 2003 to 2004. We were buying the dating keywords, other keywords, things that were appropriate, and generally we’d pay out immediately. Then, the member would upgrade. Then, three or four months later we’d return the money back and everything was good.
Andrew: I see. Any ideas even back then, if I’m understanding you right, was to get new members into Singles365.com and then create a WhiteLabelDating site that other people can use in order to grow their dating site? So, every member that you got in your site was part of the big pool of members that you were going to make available to other dating sites that partnered up with you.
Ross: Absolutely. In dating you need that critical mass. So, that was our approach, and I like the WhiteLabelDating model. I believe others call it private label as a model because you have other people doing your marketing for you. So, it means you have to give away some of the revenue, but in the web most web businesses real cost is customer acquisition.
So, if you can have other people who are far better than I am at that marketing doing the job for you, it’s a great model. It lowers your risk. It means you’re not dependent on just one brand, like a lot of other companies can be, and it gets you distribution.
Andrew: Now, one of the reasons that companies work with you is because it’s insanely hard to get the first few users of a dating site and to build a community from nothing. You did that, though. How were you able to do it in the early days?
Ross: Well, you know, this was after the dotcom bubble burst but before the economy credit went difficult. I think, to be honest, we got it right at the end. We were quite lucky with our timing. At that time in the UK there was some slow, large players. We had Match.com was in the UK. There was DatingDirect which was a home grown dating site.
But, fundamentally all of these were a software platform with a database, and the only thing that differentiated with them was the brand. So, I think getting Singles365 live, we then through, maybe, a bit of luck or a few early partners on board, they believed in us and they helped power the sites incredibly quick.
What I would say is because we didn’t have outside investment, our initial growth was very, very slow. We just reinvest, reinvest. We founded the company, Global Personals, in 2003. I’d say it wasn’t until 2007, four years later, when actually we started growing fairly exponentially. So, I said earlier we’re now at about 20 million pounds revenue. Back in 2007 it was probably nearer 3 to 4 million. So, it grew very quickly in that time.
And now, it’s great because it’s a fairly defensible position that makes it very difficult for other people to come into this category.
Andrew: Right. Because if they were to launch today, they wouldn’t have so many users. They’d have to start off from scratch and just build it up from there. Where did you get the idea to do this?
Ross: The WhiteLabel?
Andrew: Yeah.
Ross: I think you see it in other industries. So, sometimes I will describe it very much as doing, we’re the people that make the Tesco corn flakes or the Wal-Mart flakes. They exist elsewhere. It’s just taking an existing model and applying it to a different industry.
Andrew: What was your connection to the dating industry at all? I think a lot of people wouldn’t have even thought of the dating industry, let alone how to back end a business in there.
Ross: Well, I think being single helps and using other dating sites. Looking back, I didn’t know different. So, we didn’t realize what we were letting ourselves in for. It was just fun. The dating market, a lot of these sites are all very similar. They’ve all got software. So, you’ve got the technology, the database, and the brand.
The only thing that really differentiates them is the brand. So, that’s why we thought we’ll build the other two areas and reskin the brand and then that’s got to be the best approach rather than taking a Match.com head on. That would be crazy.
What’s most interesting now is we do see some startups make it work. Suess is a really good example, the Suess dating site on Facebook. They took advantage of a new Facebook is basically their form of distribution. They reach their consumers through Facebook. We reached our consumers through “FHM Magazine,” “Men’s Health,” things like that.
Andrew: What were you doing just before this? I usually will have your full bio here on my screen, but it looks like it’s not on my screen right now.
Ross: That’s OK. I went to college on an Air Force scholarship. I went to be a pilot. So, that started me going through there. Then, I kind of fell out of that mood for flying which is a lot of fun and it’s in the military. My previous psychology and French and science ended up in the late ’90s without this scholarship but with a life style that could use that money.
So, I set up my first business, Rawnet, which is a digital media agency. We set that up in 1997, ’98, helped pay through college. Then in 2002 I took on my first employee.
Andrew: In 2002 you took on your first employee at the consulting company.
Ross: At Rawnet, yes. He’s still going today. He’s actually a chap named Adam. He’s now doing very, very well. In 2003 I set up Global Personals. It happens a lot. This is a digital agency. They do web design. They do the work, and they have paying clients. If you don’t have paying clients, which back in 2002-2003 would happen on occasion, you got people who sat there not doing anything. So, we put them to use to build WhiteLabelDating and yeah, it’s fun after that.
Andrew: Tell me about one of the ideas that you did before WhiteLabelDating, maybe, one of the flops. I always love to hear about the flops, if I’m going to hear about the successes.
Ross: Yeah. Well, I think, it wasn’t a flop. It’s successful. If I look at the agency I started, it’s certainly a lot more successful now than when I was running it. But, it’s an agency the more we sold, and we were quite good at selling, the more we sold the more our cost went up.
And so, it wasn’t a very scalable model. You’re billing per hour. Your costs go up in relation to your sales. So, that doesn’t really work. That wasn’t great. And I think also we did have a bit of a flop. Back in 2008, we looked at WhiteLabel social networking because back in ’07 or ’08 Facebook was growing. We were thinking, is this a risk because we were in the dating business.
So, we set up WhiteLabelNetworking.com, the idea of doing a WhiteLabel version of Facebook. Then, Ning came along and did that far better than we would have been able to do it. And so, I think then we sort of decided to focus on dating because social networking is an area with big growth. You can set up advertising. You can [inaudible]
Andrew: Dating is monetizable because people are willing to pay for it versus social networking where no one’s willing to pay, no one’s willing to pay attention to the ads. It’s just not as easy to make money on.
Ross: You know, I think always, if you’ve got a product that people are willing to pay for and has value, that’s a good place to start. Some sites do content. The content here on Mixergy is fantastic. I think some people should pay for that, but it’s not my business to say that.
Andrew: Some people do pay for it. Content is a tough business to be in. There’s no way the content makes as much money as a platform in my mind. I want to know how far you got into the social networking WhiteLabel business before you said, “Nope, Ning’s got this covered. I’ve got to back away and do something else.”
Ross: Just preliminary business planning, you know. When we look at paying when the user might get charged $20 to $30 a month, $40, $50 the price is actually quite flexible. When you look at what you can earn from advertising from that same Ning user, you’re talking a few cents a month. It just doesn’t add up when you look at the cost of customer acquisition.
And I think Ning, a lot of these businesses can have a high valuation and they can do good revenues, but actually what about the profit at the end of the day? That is the challenge. It’s not difficult getting high revenue. The difficulty is getting the low acquisition cost so you make a profit at the end of the day.
Andrew: What’s your split with the dating site that uses you guys?
Ross: So, we typically work on a 50-50 basis. So, if someone starts up with us, it’s no cost to set up at all. So, they’ve got no risk. Unless they don’t make money, we don’t make money. But my partner team are helping them set up, going over cost. Generally, we make sure we get a return on that. So, yes, it can be 50-50. And what matters in dating is conversion. So if you send a hundred members to the site, how many people are going to pay and that can vary anywhere between 5 percent and 25 percent, depending on your niche and what network you go for.
Retention is also important. How long are they going to pay for? Now, of course, we’re in an unusual position as an industry, but the better we are at what we do, the better we are helping you find love online and that’s money we’ll make theoretically because if you find someone on day one that’s it.
But, the most important thing where we sort of position ourselves is that most relationships won’t work out. Otherwise, we’d all marry our high school sweetheart. So, what you want to make sure is when people use the site they have a good experience. We’ve invested heavily in customer care and customer service to make sure that when people do leave, if they’re in a situation in life where they start looking again, they come back to us first.
Andrew: OK. I’m wondering how your fee structure evolved over the years. What did you start off offering the very first company that was partnering up with you, back before you had any leverage?
Ross: Well, on the partner side we worked on a 50-50 basis then. We just had a simple membership fee. So, I think at the time it was a fixed fee of 15 pounds a month. And that’s what we did, and that’s all the customer could do. At the time we got membership rates, going from something like 5 pounds a month to 40 pounds a month to the end user on what is effectively the same system.
So, the brand is different, but the database is the same. The software is the same, and what that shows you is the elasticity of pricing. We can charge someone 5 pounds a month to 40 pounds a month. It’s about perceived value, and a lot of that comes through the brands. So, some brands will charge higher than others.
Over time, about two-three years ago, we added credits. So, what is a fixed fee, people could pay more for certain services and that worked well because that’s effectively for us and our partners that’s almost free money. Once you pay to acquire a customer, the cost is paltry and it’s marginal. So once they’re on there, the more revenue we can generate for them, the best for them really. And it’s good for the consumer because . . .
Andrew: How does credit work?
Ross: So, you join the site. You pay your fee, and then you might want to do a personality profile, so a bit eHarmony-like. So, you fill out some questions, not hundreds and hundreds. You fill out some questions that can give you a personality profile, or you might try sending someone a gift. Gifts work really well because if you’ll spend a dollar to send a girl a message with some nice roses on it . . .
Andrew: I see. All of these are up sales on the initial payment that a person pays to interact with the site. I see. And what you were saying earlier was the fee structure was always 50-50, but there was one price that the user had to pay. Now, you’ve got flexibility on the price, but it’s still within the boundaries that you give them.
So, if I were to hook up with you guys and have a Mixergy Personals and say my people have so much money and they’re so exclusive that I’m going to charge $300 to enter, that’s not a possibility. It has to be capped on whatever your cap is, right?
Ross: No. I mean, that would be a possibility because we’re partners and if there’s an opportunity and people pay for a niche because ultimately with online dating they are paying for the convenience. It’s why you go to Starbucks and you pay so much for a coffee. It’s the customer service. It’s convenient. It’s on your route. And that’s what online dating is about.
So, we’re flexible with the pricing, and I think also with the way we work generally on a 50-50 basis, what matters is money in your pocket. So, there are WhiteLabel players, and some people might offer 60 or 70 percent revenue share, but it’s a much smaller piece so you’re left with less money.
I do think, probably in other industries, people do get fixated about revenue share and they’ll go for one or another. It’s similar in the affiliate industry. If someone’s paying me 10 pounds but another person’s paying me 12 pounds, you think, well, I’ll go to the 12 pounds. But, actually it’s about conversion as well. It’s the whole mix. Fundamentally, I think the reason we’ve been as fortunate as we have and grown so much is because we convert better than other people.
Andrew: By the way, where are you? I’m looking over your shoulder. I see a printer and a piano. So, I can’t tell. And I also see what looks like a TV set or a case that used to hold a TV set and above it a model airplane. So, I can’t tell where you are.
Ross: I am at home. This is my home office. So, I work from here, and then if I get too stressed, I’ll go on the piano and take it out on that.
Andrew: Gotcha. And do you work from home usually?
Ross: I try to. I try to break up the week a little bit. So, my office is in Windsor. We’ve got about 18 staff there. So, I don’t want to sound redundant, but long gone are the days when I had to stress and worry with all that. I find I’m very productive. I think when you’re in the office and if you’re leading the business, lots of people want to talk to you and you get interruptions. Actually, if you’re not there, they don’t need you. So, I probably work from home about two afternoons a week.
Andrew: And that’s not a TV case behind you. I see a key.
Ross: It’s just a filing cabinet. It does look like that a bit, but no it’s just a filing cabinet there.
Andrew: I see. You know what? You don’t seem too uncomfortable with me prying into your house and what’s behind you.
Ross: I’d give you the grand tour, but I can’t lift up the (________). It’s a nice place here. I think your office is important. It’s calm. I locked up the dog, otherwise she would be jumping around. Apart from that, it’s quite serene.
Andrew: You know what I’ve been thinking lately? I should be working from home. The Internet connection in my place is now super fast, and in the office it’s so terrible that we can’t have a live audience with us today because Regent still hasn’t fixed their Internet connection yet.
Ross: Oh, well. You should pop down to the local Starbucks. You get free WiFi there, don’t you?
Andrew: I need dedicated Internet. Otherwise, it’s just not enough for the video that we do and everything else. They’ll work it out here eventually. All right. So, you started this thing. You started building up your own database. How many people did you need to have? How many active members roughly did you have before you started soliciting WhiteLabel clients?
Ross: Probably around a quarter of a million members, but that’s in the UK which is quite small geographically. So, what matters to the customer is that when they run search they meet someone. There’s enough people there they fancy enough to send a message to.
So, in the UK it’s a very high population density. In two to three hours I can be at the other end of the country whereas in Australia two to three hours you’ll go for a beer. It’s right about at a quarter of a million, and we work on that basis for launching into new territories. So, when we launched into South Africa, for example, the critical mass there was about 100,000 members. And in the U. S., of course, it’s much, much higher.
Andrew: Do you really think you had over 100,000, well over 100,000 members before you could test out the original business model that you had which is WhiteLabeling?
Ross: Yes. I mean, we started talking to people immediately. And when you start up there it’s a bit of ducking and diving, sometimes necessary when you don’t have the luxury of private equity, VCs, or angels behind you. When we signed off as partner it was about media. It was (________) before that. And it was “Yours Magazine” which is the top magazine below 50s in the UK.
So, we signed off on what matters. If in London, I carry out search results that I get, a couple of pages of results. Now, at the time and on a couple of pages you’ll see 20-30 profiles per page, 20-30 photos come up. Then, we had five. So, then I can see three pages, that’s 15. So, we were lucky with the user interface in that regard.
Andrew: I see. OK. How did you make that first contact? This was a magazine that was called Your Magazine.
Ross: “Yours Magazine,” yeah.
Andrew: “Yours Magazine.”
Ross: Yours.co.UK. It’s a big magazine. It’s cold calling, emails out, just a lot of hard work. And to be honest, with my business partner, Steve, who runs the calmer side of the business, he did most of the work. And so, my job was really focusing on the application. He did a lot of the work. I think it actually came out from a mail shop, rather old fashioned really. For me, it’s always additional revenue.
So, for them if they’ve got spare capacity, they can’t much sell the advertising. They know they can sell space for the dating site. They won’t make the money immediately, but after about four months they’ll make back what they would have earned had they sold the advertising. And by month five it’s just free money because it’s a business that keeps on giving with the subscription revenue.
Andrew: When you say it was by mail, you mean you guys sent out bulk mail to people who you thought would potentially be good partners, or was this just a one off?
Ross: No. We targeted publishers. So, you go for the list. There’s something called the Association of Online Publishers, and we just went through the media list Excel spreadsheet. It seems so basic nowadays, but it was only 2003. So Excel spreadsheet, mail merge with Word, letters go off second class to save money. And, yeah, we just followed up with them. Yeah, it works.
If you’ve got the right proposition for the audience and fundamentally we can help you make more money than you do currently. There’s no cost to this, and we won’t make money unless you make money. So, people can’t lose.
Andrew: Interesting. OK. So, you get them on board. What’s the next big milestone for you?
Ross: If I think back, in 2007 a couple of important milestones. The first was actually negotiating our merchant account. So, we take money with people’s credit cards, and then it took 30 days for that money to come into our bank account. So that meant day one we spent the money. By day three or four the customer has paid, but it’s not until day 33 or so that we get the money.
The first thing was negotiating with the bank. We were with (________) Merchant Services, and I had a part-time finance director at the time. She came in once a week and helped us with the accounting. She helped us negotiate with (________) cards to move from 30 day to 5 day, setting the terms.
Now, the effect of that is actually you get a whole week of cash that comes into the bank account immediately to the tune of about 300,000 pounds, and then we found ways to spend that. So, we put in more on the online marketing, and it just accelerated the growth.
Then, of course, by going to “Yours Magazine” it was part of email. Now, they’re popular and they’ve got lots of different titles. So, you’ve got one title that’s building a relationship. Now, another title, then another and another. You build up now. Now, we do radio stations with them. On some partners we’re running one partner, the media partner, we’re doing hundreds of niche newspapers. So, all local newspapers, all powered by our system. You only have to talk to a couple dozen people, and you could have hundreds of sites like that.
Andrew: You’ve got to 200,000 members before you brought “Yours Magazine” in. This was on credit cards. This was with the expense of having a finance person come into the office. This was at the time when you were paying to send out even second class mail in bulk, ads money.
Ross: Yes.
Andrew: Were you profitable by then? How were you able to pay for all that?
Ross: Well, the consumer paid from day one. So, although we had to go to the critical mass, there was the point where people started paying.
Andrew: You still then were able to build a profitable online dating site at the time when Match.com was already entrenched, when eHarmony was already out there reshaping the industry, when there were competitors who were strong, who were competing for placement in Google search results and in AdWords. How did you do that?
Ross: There’s two main routes. One is the brand, the consumer. We didn’t have to pay to acquire the consumer. So when Match goes out and it . . .
Andrew: But, this was at first. This was before you brought in outside partners.
Ross: On Singles365, these were an experience. So, it comes to conversion. Now on Singles365, if 20 percent of the people would pay compared to Match.com where it’s, maybe, 10 or 12 percent, you can see we’re getting double the revenue for the same acquisition cost. So, it starts becoming profitable.
And we’re only competing with Match.com on one channel. At the time they would have looked at us and we were a bit of a minnow, just another dating business. It wasn’t until later when we brought up WhiteLabel. I think it’s called guerrilla marketing. We basically kept our heads low.
Andrew: To be more specific on the guerrilla marketing tactics, what did you do specifically that helped you increase conversions, for example?
Ross: So, conversion is basically going from a free member to a paying member. First of all, why do people pay? They only pay to communicate with someone. So, how can you make it easier? So, one of the things in our process, once someone’s registered, we’ve got funnels from a basic member to trying to read a message, to being prompted to upgrade, to completing the form and operating.
And now, you can actually look at what form fill they’ve got to complete. The problem is typically in dating, say you’re advertising, you’ll have 100 clicks to a registration page. Those hundred people that search for dating, that clicked on your ads, you’ll be lucky if 20 actually register. Of those 20 who register, you’ll be lucky if two pay. So, only two people out of the original hundred.
What that shows you is there’s a huge opportunity there. If you can tweet each person with that user experience, that is what we did.
Andrew: Give me an example of something that helped you tweet because I’m hearing you say tweet, and I hear everybody in the industry tweets, not just Match.com who’s got tweeters who do nothing but tweet, don’t they?
Ross: At Match.com. It’s often about keeping the platform alive or doing innovations, and these sites can get over complicated. It’s very easy to forget what people on your sites do. In our case, it’s to meet other people. So, you can put all the bells and whistles on these, but if it doesn’t help that number one user goal, it just gets in the way.
So, if I think about what we did, we experimented with certain things like astrology, for example. So, some of our sites would run astrology, horoscopes, astrological matching. We did it because we felt the women would enjoy it, stereotyping thinking that the females enjoy horoscopes more than males. So, if we got the women on board, we thought the guys would follow.
If you look at the profile page, the way we originally designed things was that the same amount of real estate was given to that page regardless of what functionality it provided towards monetization. So, for me if there’s a profile, I want people to click message or possibly wink at them.
But, there’s all these other options they can do that don’t result in us getting revenue. So, it sounds very simple now, but back then it was just the case of opening your eyes and realizing what the user is trying to do. Don’t put too much in the way of energy to put out because we know where the girls were, and how they behave.
I think nowadays they say, “Oh, it’s so much easier nowadays, but you’ve got Click (________). You’ve got Heat. So, you can see where people are clicking. You can do eye tracking, analytics, the funnels. You can see where on the form people are leaving.
Andrew: So, one of the things you did was using whatever tools you had at the time that you were first building up was . . . you said you need people to message each other because if a user messages a second user, that second user has to buy an account in order read that message and for similar reasons we need them to wink at each other.
So, instead of making those little buttons that are just part of a much bigger form with rich options, we’re going to make those really big, really clear and entice people to click on those. And that’s an example of the way that you got people to interact and bring more people in. What about . . . go ahead.
Ross: I was going to give you another one, one more example which is people can’t use the sites. You can’t make money from people if they’re not on the site, and if they’re not on the site they’re not going to contact each other. So, email, simple stuff. We started sending people an email when someone looked at their profile which now is fairly commonplace, but it wasn’t then.
We started sending them an email if someone winked at them, added them as a favorite, any excuse to send them an email because that gets them onto our site. And it’s only when they’re on the site that we can monetize it. Now, we have mobile and other stuff. But, at the time it was very, very difficult. So, that’s something else to bear in mind. You need the customer on your site to make money from them
Andrew: So, if I get an email that says somebody looked at my profile, I have to pay in order to find out who that person is?
Ross: Yes. Yes.
Andrew: But, you will tell me who looked at my profile.
Ross: We’ll give you their name, their age. At the time we restricted pretty much everything. Things have changed now because, to be frank, in the early days you could get away with restricting access. Now, because competitors do, we let people see more. There has been a big rise in our industry for free. A good friend, Mark, with PlentyOfFish, is doing very, very well, and has really shaken up the industry and it’s free.
So, we have to focus on customer service which isn’t cheap. I’ve got 80 staff in a big office in Windsor. We have to pay for that and then we charge the customer. What it does means we can then comb back scammers. We can invest in customer car. We offer free telephone numbers. So, if people want to call up, they can speak to real people in Windsor. We don’t have morphed a call center somewhere.
Andrew: Most people don’t need customer service for online dating. I remember I went through the process, and it’s pretty straight forward. You either get response, or you don’t and the system can hopefully help you choose your responses. But, it is what it is. You don’t need help the way you might for a program you install on your computer that might screw up your whole system. So, customer service isn’t that big a reason to pay. True, no?
Ross: If I could respond.
Andrew: I like that, please.
Ross: Customer service, the online dating industry, you’re an attractive guy. No doubt, you get a lot of attention. But, if you had a 19-year-old blonde girl with a lovely figure sending you a message, you might be tempted to respond to her and pay to do so, and then find out she’s not genuine. That is an issue we have in the dating industry. We’ve got scammers. People make a lot of money by doing that. So, the reason people pay with us is to clean up that database to be sure everyone on there has a genuine profile.
Andrew: I see. Customer services doesn’t necessarily mean that at the time I need to call up and figure out what that button that says “wink” means. It means someone behinds the scenes is making sure that the scammers aren’t out to get me.
Ross: That’s true.
Andrew: How big of an issue is that for the free dating sites, like PlentyOfFish?
Ross: Well, they can use algorithms to see if a member has been reported enough times, then it automatically removes them. When you’re making pennies from each member on there, it just doesn’t add up to be able to support. You just cannot support them to that degree. It’s not financially viable. So, they rely on other methods.
So, as a result the reputation of the free sites . . . it’s a great way to get started and a lot of our partners advertise on PlentyOfFish and others, but if you’re serious about meeting someone, it’s 20 or 30 bucks a month. It’s not a lot of money to meet the love of your life. So, people are then willing to pay more to get that quality, to know everyone they contact is real, that those people are on there, and that there’s people behind the scenes to help them.
Actually, if you’re not having luck on online dating, a lot of it is down to the eye. Do you have a photo? Do you have a video? Did you send a wink as an icebreaker? And you can call people and they’ll take you through that to give you that success.
Andrew: Let me ask you this. Markus of PlentyOfFish rips into or has things to say about the pay dating sites. He’s demolishing a lot of the competition, no question about it. What do you, as an insider, think about him? Give me the flip side of that argument. What’s up with him that we’re not seeing because we’re so obsessed with his success. It’s changing the paradigm blog, and no question he’s become a celebrity. So, what are we not seeing about his business? Tell me.
Ross: You haven’t seen him drunk around the poolside in Miami, like I have.
Andrew: You know what, if I told you all the CEOs or the founders of Internet companies who I’ve seen drunk . . .
Ross: I’ll tell you what. Markus of PlentyOfFish, you’re absolutely right. That’s what he said. About two weeks ago, I think he announced eFound.com, which is a pay dating site. He’s a brilliant lesson in startups because actually what he did was he found a niche. He found his angle at being a one man band against Goliath, and he milked that for what he’s worth.
Andrew: What are we not seeing? Are you close to him because you saw him drunk and you guys partied together to tell me what’s going on?
Ross: The site makes money. Absolutely, it does. They don’t make as much money as both personals or other businesses. But, it costs a lot because he doesn’t provide customer care and everything else. It’s challenging to maintain a business model when you grow you add more customers and more service. Advertising declines. I think it’s quite telling that they’ve now launched a pay site in the process.
When you compare the revenues, it made sense for him to do that. I think what’s more interesting is OK Cupid. I think those guys are very interesting. They’ve got a social brand. They’ve got good user experience. It’s got the quality of a pay site, and it’ll be interesting to see what happens with them over the next few years. I think they’ve got good potential.
Andrew: Why were they able to do so well?
Ross: They’re statisticians, so they come from a math background. And I think that’s quite telling. You know, I did development before I started the dating business. So did Markus. So did these guys. It makes a difference if the people behind it are thinking slightly technical rather than being pure marketers or anything else. They did well then with PR. Because they understood statistics, they could go in there, find good newsworthy statistics, and they milked it and they got on TechCrunch and a lot of high profile blogs.
I think that was a good strategy for them. With Markus, his PR was about David versus Goliath and they’ve done very well. The interesting thing there is they used to use Google AdWords, so he’s an ad publisher. So, he was giving money to Google. He’s now brought his ad platform in-house which means he can keep more margin, and also means the customers, the advertisers, can get more for their money. So, I think that’s quite interesting there.
Andrew: And he actually pays for new members. He has an affiliate program, I think. He’s paying. Do you know about how much he’s paying for a new member?
Ross: No. I can imagine he could afford to pay a couple of dollars.
Andrew: Yeah. It is somewhere like that. It’s between a buck and two from what I remember. I don’t have the numbers, and it varies, I’m sure. How’s he making money like that? How is he making that kind of money that kind of money back off of advertising, pushing his free users to sites that are paid. Do they give him affiliate revenue?
Ross: Pretty much. It’s actually more per play. Just these figures, I would say most days the sites pay between 5 pounds and 10 pounds per basic member. So, call it an average, say $10 per basic member. And that means if we’re paying that he can afford to pay $2 to acquire someone because if one in five of those go on to become a basic member of another site, he’ll make his money back.
Andrew: I see.
Ross: Thus, those are the kind of (________). It’s all about the ROI. If you make less per member, you need a lower acquisition cost. But, I would imagine on his clicks if he uses just one click on an Advert, he’s probably making his acquisition cost back. It’s one to two dollars per click.
Andrew: OK Cupid, you’re saying that those blog posts that they put out there with statistics like people who own iPhones are much more likely to get laid. When they do those kind of statistics in the blog post, that’s what gets them publicity. The key to their success as an insider, that’s a big one. That’s the key to their success is what you’re saying.
Ross: I would say, just my personal opinion, absolutely.
Andrew: Can’t you do that? Can’t you just get some clever PR person to go into your data and find cute stats to show and get the same kind of publicity that they have?
Ross: I think all they probably do is . . . I’m not saying they do. I think an easy way of doing that is to think like, what’s a newsworthy title, what’s a newsworthy stat. Have you got the data to back that up because it’s very difficult to find. People that understand data, it’s a very difficult skill. My eyes would glaze over when it goes into that level of detail.
So, you have to work to your strengths, and in their case they do data. They’ve got an eye for detail. That’s their strength. Markus has his. Match have theirs. eHarmony have a different situation, and our strength was WhiteLabel. So, I think you go for what you’re good at and not get too distracted by trying to be all things to all people because you will fail. You’ve got to focus on the strength.
Andrew: When I gave the introduction, I said that a top consultant in the personal business is the one that introduced us or helped us together. I didn’t give the guy’s name because in the introduction, to give so many names I think it’s too confusing as it is. I don’t think that I pay attention to 50 percent of most introductions when I hear it, even by professionals, and I’m a professional.
I don’t want to overload the intro, but I want to give the guy’s name. It is Mark Brooks. He told a story in his interview about how fraud actually helps a little in this industry and how it helped you guys. It reduced your revenue for a while when you filed fraud and how it came back up.
I want to hear first person from you. Can you tell the whole story?
Ross: Yeah. Absolutely. So, he was referring to a conversation I had with him. I didn’t know he had told you, to be honest. In fact, it was earlier this year. We made the decision in November or December to eliminate scammers from our database. Now, scammers, in fact, are removed from dating sites.
Just to give you a background on scammers, their job is to go onto a social networking site, a dating site, anywhere where there’s people, build up a relationship with someone, build up the trust, and extort money from them. Dating sites are a particular target for these people because you’ve got people on there, customers who might be vulnerable, who are looking for someone and it’s an easy way to get money.
And the down side to that, of course, is for the long-term I don’t think that’s a sustainable business allowing that. So, we took the decision to invest in our . . .
Andrew: Before we talk about that, we have to acknowledge that there is some benefit to dating sites to allow these guys to come on. Do you feel comfortable saying it? Do you want me to explain what the benefit is?
Ross: No, no. Absolutely. So, one of the things that, not for ourselves, but there are dating sites out there. By allowing scammers, this scammer comes on overnight. They could send 500 messages, 1000 messages. Take it that the site is free. So, getting out a credit card, at least, is one thing to block them. But, let’s say they pay. Let’s say they send hundreds of messages, and they’re an attractive girl. You then have hundreds of guys to read their message and correspond with them.
So, it’s not the money that the site makes from one scammer, it’s the money they make from hundreds or thousands or tens of thousands on a free site. I can’t even begin to think. So, the dating industry makes money from it in the short term. In the long-term, however, if you get messages from scammers you’re not going to come back. You probably might not complain. You’ll just let your membership lapse and never return. That’s when we decided to eliminate scammers.
Andrew: And when you did, you lost a little bit of revenue.
Ross: Lost a lot, so what? What happened is we introduced the moderation team. We checked and it went from not nothing but that much protection to every photo, profile, wink, icebreaker, anything you submitted goes through a manual verification process. Prior to that, it was a lot of automated stuff but the only way to get humans to look at it really.
We’d go through that process. We introduced that and overnight what happened was we lost the revenue that these scammers were generating because scammers were no longer able to send tons of messages because we caught them; therefore, people weren’t upgrading. Yeah, we took a hit.
But, what I said to Mark, that was back in February and our partners took a hit long-term for about three to four months. All of our pay sites have recovered, and now people are converting at a high rate because they know the profiles are genuine and they’re staying for longer because on that they’re corresponding with real people.
Andrew: What’s a KPI? You said that.
Ross: A Key Performance Indicator. So, revenue to me is the last thing I look at at the end of the day. When I wake up in the morning, my Key Performance Indicator, my business has net change. So, how many more or less paying customers do we have today than we had yesterday? As long as it’s positive and we get more paying customers, then everything else will fall in.
We also look at conversion rates. So, what’s our conversion basic to [?] What’s my termination rate? So, a big thing this year with folks is the termination rate, how many customers are leaving us because if you can stop 10 percent of your customers leaving, that’s the same in a subscription business. It’s getting 10 percent more paying customers, but you don’t have to pay for those 10 percent more paying customers.
It’s just a lot more effective, and you don’t mind. There is where a good finance director can be invaluable because I didn’t really know or care about it, to be honest, until he gave me a 12 month spreadsheet and said, “If you reduce the termination rate by five percent, this is the effect on the bottom line, on our profit” and there were lots of zeros there. So, that got my attention, and it shows the importance of really solid financial support.
Andrew: What else do I want to know? I’m curious about at what point did you know that you’re an OK business, that you made it, that you were on safe ground, especially coming from a background of borrowing so much on your credit cards.
Ross: Yeah. I’ll be honest with you. When you earn money, you find a way to spend it. And I think every business if they become successful, they have to learn for themselves what’s important in life and what’s not. I went through the flying things. I then went into cars. I haven’t quite lost the car addiction yet. I think you have to work out what’s important.
For me, I think having lots of money, the cash is in the bank, knowing after all we’re a profitable business. I think the great thing with a subscription business is, say, we stop tomorrow. The money keeps coming in and in and in. So, that’s nice. That’s comfortable. If we sold nothing else, we would just keep rebilling.
Our partners would keep rebilling, and I’ve seen that happen actually. Some of our partners for one reason or another, setting up holiday, they may stop marketing for a month, and they come back and they’re still earning which is good.
Andrew: Can you take me to when you made your first million because we talked about so many millions here that I imagine that for many people the numbers just don’t have any sense? But the first one does, the first million pounds, real money, not dollars.
Ross: I can tell you when. Are you talking about the business?
Andrew: You know what? How about you and the business since there’s a distinction there?
Ross: Well, the business was . . . you look at revenue. You look at profit, and you can see, maybe, in there. But it doesn’t mean you’ve got any money in the bank. I think it’s always crazy how when you’ve got an asset registered. You’re making 300,000 to 400,000 pounds profit, and where’s the cash? It’s all taken up by other things.
So, a key moment for us was when we had a million pounds of cash in the bank. That was a screenshot. I think Markus when he got his first check from Google, I think it was for a million dollars. I didn’t have a check. I wished I could have withdrawn all the money into a check, take a photo of that, and put it back in the bank. Maybe, I should have done that. But a screenshot of online banking, that’s a big thing.
And for me personally, the nice thing is being able to live in a nice house, be comfy and just have whatever you want, whatever you need. What I’m realizing more and more is money can’t buy any happiness. It can’t buy you love. It’s really not about that. What it can buy you is a bit of freedom, a bit of opportunity.
You don’t do it for that. You don’t do it for success. You do it because you love what you do. The money is the by-product of that. It’s not what anyone gets up for in the morning.
Andrew: Have you found love yet?
Ross: I did. I did. So, had you asked this question about five months ago, I actually met my girlfriend on one of our sites on Singles365. Regrettably, I’m British, she’s South African. The World Cup came on, I don’t know. Unfortunately, it didn’t work out.
Andrew: Wait, wait. Hold it. The World Cup broke the two of you up?
Ross: That’s what I’m going for because she went back to South Africa for the World Cup and fell in love with the country. South African is a wonderful place.
Andrew: I see. And so, she just can’t live outside of South Africa.
Ross: I don’t know. I’ll see what happens, you know.
Andrew: Have you talked to her since you guys broke up?
Ross: Yes, very much. And she’s actually in London at the moment. So, we will see.
Andrew: So, you might see her in the next few days.
Ross: I might see her, yeah, in the next couple of days.
Andrew: Oh, wow, all right.
Ross: We’ll see how it plays. The trouble is she’s watching this, I’m telling you.
Andrew: No. She’d love it. How long were you guys dating?
Ross: It’s been about three and a half years. So, it was serious. This is the thing. Online dating, I would never have had the opportunity to have her in my life had it not been for online dating.
Andrew: What was it about her profile that got you interested?
Ross: Well, she was hot. That helped. These things happen when you’re least looking, and at the time we were sending messages back and forth. And I wasn’t really looking for a relationship or a girl. I was in my “I’m fed up with dating. I’m fed up with women.” And I think she was attracted to that. So, I think that helped. That broke the ice a little bit.
There’s also things to say that I wouldn’t be where I’m now if I didn’t have the support of her in my past. And that applies to anyone. Your home life, if you’re going to focus on something . . .
Andrew: This is good stuff. In case she’s listening, she should hear this. How did having her in your life help your business?
Ross: I was stable. I had someone I could talk to because the thing is when you build your ambition, there’s not that many people you can talk to. I can’t talk to my parents because I don’t want to worry them with the business stuff. I can’t really talk to my friends about it because it’s difficult to relate if they haven’t gone through it.
Networking stuff is great. You can build a network where you can share things like, you know, HR, staff. People is the hardest thing. It’s emotional. It’s very difficult to see the equal side of that. So, you have someone you can love, that you can talk to and give advice to, and they help me.
When we got together, I was still running Rawnet. And when we split, I was CEO of a multi million pound international business. There’s absolutely no way it would have happened without her. I think it’s the same for a lot of people. It’s cliche. Behind every great guy is a great woman or behind a woman is a great guy. I think it really, really helps. Now, I have a dog. The dog’s always there. I can come home and talk to her.
Andrew: It’s not the same. What’s her name? What’s the girlfriend’s name?
Ross: The girlfriend’s Terry and the dog is Nala [SP]. Nala is a Swahili name.
Andrew: Did you pick out the dog together?
Ross: We did, yes.
Andrew: And her name is Tali?
Ross: The dog’s name is Nala.
Andrew: Oh, you’re going to bring the dog. I was going to address the girlfriend. Oh, I see. All right.
Ross: So, there we’ve got the dog. You can see the puppy.
Andrew: Yeah, now I can see the dog.
Ross: It’s like showing baby photos, isn’t it?
Andrew: You’ve got to come back. You’ve got a dog. You’ve got a boyfriend.
Now, back to business. How about we talk about this flying that you mentioned earlier? I scribbled down flying. What do you mean by flying? What kind of flying do you do?
Ross: When I was 16, I got what was an RF flying scholarship. So, the RF paid for 20 hours of flying. And then, I worked and I made up the other 20 hours I needed to get a license. This was when I was 18-19. So, that was fun. So, I did the flying thing for a bit, and I’ve actually cooled it. Flying is expensive. That’s a great way to spend money on stuff. So, I’ve paused that. I’d love to get back into it.
Whether it’s flying or whatever it is, I like that you can be challenged. If you’re great at something, it’s nice to do something where you can learn. I don’t play golf myself. I hear that’s the big thing, and learning something is difficult. I’ve had a few helicopter lessons, and that’s hard which is good because you have that feeling of getting better and better at something.
Andrew: And the cars, you say you still have a car addiction?
Ross: I have a little bit of an addiction as people who know me. I’ve had a couple of TVRs which are British hand-made sports cars, very dangerous things. I’ve now got a DVS, Aston-Martin DVS. That’s a very, very nice car.
Andrew: I was wondering if you just had the shirt or if you also had the Aston-Martin.
Ross: I just feel that somewhere I should take this thing off.
Andrew: Let people see it.
Ross: It came free with the car.
Andrew: Did it really?
Ross: It did.
Andrew: That’s the way to earn it.
Ross: Second car, it came free. That’s the most expensive shirt I’ve ever bought. I got a free car with it. You know, all of this stuff is nice. It is nice, and you should reward yourself. This is the other thing. I think whatever you enjoy doing, it’s so easy when you run your own business to forget about yourself. You’re worried about your staff. You’re worried about other people. Celebrate success is absolutely vital because otherwise what are you doing it for. You need to enjoy yourself.
Andrew: You know what? I think that’s a great place to leave it. I had all these negative reviews that I was going to bring up about you to make sure that I was thorough in the research and thorough in this interview, but I think we addressed it.
People who said, they email me too much. We understand why they email so much. People who said that there were identical messages from more than one person, so they’re not even that clever about how they send out these fake messages. We addressed that. There was a fake message issue.
All right. I think I did a very thorough interview, and I’ve got to say I can’t get the credit here. I just shut up here and let you talk. You were open, right from the start. I said, “Are you willing to give your finances?” You said, “Yeah, let’s do it.” We didn’t discuss it before the interview like I do with some other guests. You were willing to go for it. You talked about your girlfriend. People are going to love this.
Ross: Good. I hope it’s useful.
Andrew: Have you got a personal blog where people can connect with you directly?
Ross: You know what? I didn’t keep up the blog. I’ve got RossWilliams.com. It gives my Twitter feed and Facebook link in detail, so RossWilliams.com.
Andrew: And FourSquare tells people where you are, in case they want to just . . .
Ross: If they want to stalk me now, it’s g2@facebook places. I found myself not checking in so much. So, it’s slightly difficult to stalk me. And also GlobalPersonals.co.UK. It’s the company site while the dotcom is the [?].
Andrew: You know what else, guys? Here’s what else I didn’t get to. I didn’t get to the case studies that are on the website, like canoodle, cliffdavid, cyberphobe who ended up creating a dating site with you, everything from naughty to military to over 50 dating sites.
All right. We might have to do a second interview. I’m going to leave it here. I’ll just say, basically, thank you, guys. Check out the website. Thank you all for watching.
Ross: Thank you very much. Thanks, Andrew, cheers.
Andrew: And thanks for staying up this late to do the interview. What time is it, your time?
Ross: Actually, it’s late for me. It’s eight o’clock.
Andrew: 8 p.m. That’s another reason why you were home today. I forgot about the time difference. I really appreciate it. I know I shocked you guys when I send I’d do it at 11 a.m. Pacific. You did the math quickly. So, what am I doing?
Thanks for doing it.
Ross: That’s OK. My pleasure. Thanks ever so much.
Andrew: Yeah. Bye.
Ross: Thank you. Bye.
This transcript brought to you by www.SpeechPad.com.
Sponsors I mentioned
Shopify – Remember the interview I did about how the founder of DODOCase sold about $1 mil worth of iPad cases in a few months? He used Shopify. It’s dead simple and very effective.
Grasshopper – Don’t make the mistake of comparing Grasshopper with other phone services. Check out their features and you’ll see why Grasshopper isn’t just a phone number, it’s the virtual phone system that entrepreneurs (like me) love.
Walker Corporate Law – Scott Edward Walker is the lawyer entrepreneurs turn to when they want to raise money or sell their companies, but if you’re just getting started, his firm will help you launch properly. Watch this video to learn about him.
